Debt Consolidation
Debt consolidation is probably one of the easiest alternatives to bankruptcy. It basically involves getting a loan at a low interest rate and then using it to pay off all your high interest loans and credit card debt. Most debt consolidation lenders have arrangements with credit card companies and debt collection agencies so they're able to process your loan and get your debts paid quickly. The end result is that you have one low interest payment each month instead of many different payments. And, because your interest is lower, more of your monthly payment is actually going toward reducing your debt than if you continued making payments directly to the original creditors.
Debt Negotiation
If your current debt load is simply too large to qualify for a debt consolidation loan, you can consider debt negotiation. Using this alternative, you'll hire a professional debt negotiator who will negotiate with your creditors to reduce your debt. After the negotiations are complete, you'll still pay a monthly payment to your creditors but your overall debt to each creditor will be reduced.
Creditors are generally willing to negotiate the total amount of your debt because they risk not getting any money if you file bankruptcy. And, they know the involvement of a debt negotiator means you're having severe enough problems that bankruptcy is a real possibility.
You can negotiate with your creditors yourself. But, you'll definitely have more success if you hire someone with experience in the process.
Do Nothing
If you don't have any income or assets, doing nothing is a viable option for you. Even if your creditors take legal action against you, they have nothing to collect against. And, most creditors are simply not interested in "throwing good money after bad" to pursue you legally if you don't have income or assets.
If you choose this "do nothing" option your debts will be written off by your creditors and will stay on your credit report for seven years. After that, they'll drop off your credit report. But, be aware that if you have income or assets this is not the option for you.
Financial Management
Handling your finances in a prudent and careful way while you're earning a good income is the best alternative to bankruptcy. The old adage "an ounce of prevention is better than a pound of cure" applies to personal financial health just as well as it does to your physical health. It's too easy to overspend during the time you're earning good money. But, you have to carefully budget your money and make sure that you're saving appropriately during the good times so that you can avoid bankruptcy altogether during the bad times.
With proper financial planning, medical emergencies, loss of a job or divorce will not cause a total upheaval in your financial life and leave you considering bankruptcy as your only alternative. Without a doubt, proper budgeting and proper financial planning are the best alternatives to bankruptcy.
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How to get a home mortgage after bankruptcy - Or Other Major Credit Challenge
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